Dave: Awesome. So, we are having a blast today, and so this might be a little goofy, it might be a little giddy. We're gonna have a little fun. Have been sitting here for a little while talking about some pretty remarkable deals. And Melina I'm gonna let you kind of intro Peter in this deal that took place over in Chino. So, why don't you share with us a little about that?

Melina: Sure thing. You know, it's so funny the name of our podcast here is Flippin Off, which is awesome obviously, because all the other flipping things have been taken. We have been flipping houses for a long time and today we're gonna talk about a project that we actually worked on together with Peter, and it was a flip. We flipped a house and kind of flipped a family in the process. How many ways can we use flipping? A lot I think. We flipped a life, flipped a family, but we do what we do purposely with a purpose of making an actual difference in people's lives.

We have a saying around NWAC which is, "Real estate investors are nothing more than problem solvers." And truly, it's not the houses that have the problems, it's really more about the people behind the houses that have the problems that we love providing solutions to. So, with that being said, Peter why don't you share a little bit about the property in Chino, and our lovely couple Robert and Kelly and kind of their story? And what happened, how you met them. I think that's important. Maybe what you learned through the process?

Peter: Absolutely. I mean one of the first things that you teach us is, to take advantage of your own market, or for instance the people that you have in arm's length relationship with. So, when I first got involved in this business, the first thing I did, I started telling everyone I know what I do. "Hey I got involved with a group of investors that we buy houses, we help families, we help home owners." And through that process my sister originally reached out to me. And she's like, "Hey I have a friend of mine who confided in me that they're possibly going through foreclosure. They're potentially facing an auction, or facing a sale and they really don't know what to so. So, we actually had a training going on for a different part of a ministry that my sister is involved with, and we were able to sit down together. So, once we got in the same room together, I realized, I had been to a men's Bible study with her husband and actually had a good relationship with the family.

So, we kind of sat down, and she kind of confided in me her situation. Everyone had told her, "Hey, you know what? Your house is falling behind, your best bet is to just kind of move on either short sale the property, and walk away." So, I kind of being new at the time when I first got involved. So, I said, "Okay I know there is a potential to help this homeowner here. Why don't I get Melina involved?" So, I originally reached out to Melina, scheduled a meeting with the home owners. They came in and I have to say, that's probably one of the most memorable home owner meetings that I have ever had, in the sense that we didn't just have a meeting, like we had a fellowship. We literally had a marriage counseling session.

And we sat down and one of the first things that Melina will teach is that, the problem isn't the house. All the house is is just four walls that protect you from the elements. The problem, the thing that needs solution is usually people. So, as we started sitting down and kind of really going back and forth with what was going on, we saw that there was a huge communication gap between this husband and wife, which imagine that.

Dave: No way.

Melina: Yeah, I remember that. I was just thinking I could actually remember that conversation. One of the things that I'm pretty adamant about, when I sit down with home owners is, I don't want to know anything about their story. So, I told Peter like you know don't give me the details, I don't wanna know anything about what's going on. The reason I do that is so that I can be really present and listen to their problem or what the situation is, what the challenge is. So, I always ask the question when we very first sit down, "Hey, so why don't you tell me what's going on? What's happening because I don't really know anything. I know you have a problem with your residence but that's all I really know."

And the first words that the wife said to me was, "Well, I'll tell you my side, and then he can tell you his side. And guaranteed they won't even be the same."

Dave: That's odd.

Melina: And I was like, "Okay."

Dave: Men and women we always see eye to eye, right honey?

Melina: Right, oh yeah for sure. And it was so funny because she was so straight up about it. Like, "Look I'm gonna tell you one thing and his story's gonna sound you won't even think we're on the same planet. But we do live in the same home. And you're gonna hear two completely different stories." So, it was really shocking to me because you normally don't hear people that honest. That transparent about we're really in a middle of...like they're in a valley. And I really appreciated her transparency frankly. Because I was like, well it felt to me like a cry for help.

Dave: Sure, they are deep.

Melina: Yeah, she kind of opened up the door really with that first statement.

Dave: What was his response to that statement? Just out of curiosity.

Melina: Well he tried to you know, Robert was much more... He's the optimist I think you know of the relationship. So, he was...and the way he was seeing things was through the eyes of an optimist. And he was looking at their situation through the eyes of solution already. Because in his mind he was already working towards the solution and so, he was like, "It's really not that bad," kind of thing. And she was like, she just wasn't ready. She wasn't ready to make the changes they needed to make as a family. So, I think, I know at one point. I think right after that I said, "You know before we get started," and I think I let each one of them share and then I said, "I have a really..." Now I remind you, I did not know that Peter knew them through church or anything like that. But I felt so overwhelmed and so much like pressure in the room that I said after they each shared. I said, "Okay, this may seem really weird to you guys, but can I pray for us?" Right? And that's really how the conversation, that's how it went from there on. They were both like, "Yes." I was like huh, that's a good thing they were going to be okay with that. Because I didn't know what to do, I knew I was in the middle of a pretty intense situation.

Dave: Right. Those who are listening, let's back up real quick. So, this was your sister referred this saying they had essentially confided that they were going through some financial struggles, challenges. Was that a job or what was the...do you remember what was the deal with that?

Peter: Yeah, they had actually both very close to one another lost their jobs. So, they went from having two incomes to having no income, and frantically searching for employment.

Dave: Got it. Did we have a notice of default?

Peter: Yes, there was a notice of default.

Dave: Okay. So, you got a notice of default and then you mentioned short sale. So, maybe you can elaborate for those listeners that don't know what a short sale means and what that really looks like.

Melina: It's kind of funny because the people that were telling her that they needed to short sale didn't understand what a short sale was either.

Dave: We hear that a lot.

Melina: Seriously people think a short sale is synonymous with foreclosure and it's not. Or they think it's synonymous with a quick sale and it's neither. So, a short sale is, the short part of a short sale is simply when the lender takes a discount on the note that's owed. It's just that they owe more on the property than what it's worth.

Dave: And clearly, we've seen a lot of those in the last, gosh, can I say decade already?

Melina: Close.

Dave: Really close to a decade now, we've been seeing a lot of them and it's not so much of a media buzzword anymore but I mean we're dealing with short sales on a weekly basis. There's always the same kind of thing with home owners losing jobs, and obviously losing their jobs I'm sure that was when you said there was his story and her story that probably led to a bunch of marriage counseling you kind of stepped into.

Melina: Absolutely.

Dave: Just because the financial pressure and burden on the family is huge for obvious reasons. So, the short sale you're looking at this property and they owe more than what it is worth. So, how did you get that message, and that's such a difficult message. When I'm listening, from the outside listening, I'm hearing two people coming from two different sides of the tracks. He's optimistic and saying we're going to figure this out, and she's like I'm gonna give you a different story. So, kind of walk us through what did that look like?

Melina: Well, her problem or her challenge was that she owned this property prior to marrying him. Right Peter?

Peter: Correct.

Melina: And so, it was her, for an independent woman, it was her sort of security blanket I think.

Peter: Absolutely.

Melina: And the idea that she was losing it, and that she had no equity, it was a bit of an identity. It was painful, it was very painful for her. But the truth was they weren't upside down.

Dave: They weren't?

Melina: No.

Dave: So, everybody's saying short sale short sale.

Melina: Yes.

Dave: But it turns out they weren't upside down?

Melina: Nope.

Peter: Looking at it like if you just look at the surface of things and this is the appropriate time to bring in what you teach Dave, and deals are not found, they are created. If you look at this deal from an outside perspective and look solely at what it appears, there's a good chance that it would have been a short sale at that time. But because of Melina's experience in the market, because we realized where we were, because we realized the potential value of this house. Mind you, it had some repairs that needed to be done, it had some upgrades that could absolutely be done, and we realized that if we came in and somehow created leverage and created more equity by doing those things, that we would then be able to sell it at the top of the market and it wouldn't be a short sale, it would actually be a really good project for us to partner with the home owners and work on together.

Dave: So, partnering. So, we're talking about partnering that's we've done this I don't know how many times now. But partnering with a home owner where they don't have the ability to give the house the upgrade sometimes that it needs, the TLC that it needs to draw that end buyer that wants to come out there and have a turnkey new property that they don't have to come put money into. They're going out looking for financing and they're not gonna say I want to finance and hold back money and come work on a house.

Melina: Buyers don't have vision.

Dave: Oftentimes that's very true, they don't see the bigger picture. So, you stepped in and saw there was an opportunity. This was in Chino, and one thing we know about Chino, we've done really, really well in Chino. It is one of those cities where the right property at the right price sells overnight if it's fixed up in the right way. So, what did that look like? So, you told them, "We'll partner with you," in other words we'll come to fix this house up, and what? What did that mean for them?

Peter: Well part of the back story a little bit is kinda touching on the optimism. He had already moved out of the property because he saw the looming foreclosure, he saw like hey if this is what's going to happen there's no way to avoid it. So, he had actually inherited a property from his mother that he went and began to prepare a place for his bride, knowing that once this comes to fruition, I need to start taking action to be ready. So, he actually moved into this property, started fixing it up, started painting, replacing things and doing a lot of the work and stuff himself.

While going back to those two different husband and wife perspectives, he was going ahead knowing that she would follow. While in her mind she felt abandoned, because she thought, "Hey this is the house, I bought this house all by myself. This is my security. This is the things, this is what has defined me and my husband has now left me here to wallow by myself."

So, part of our meeting was going over the different languages of how to communicate that scenario. So, we had to kind of help walk them through that, and we were able to look at the value of the property, look at the market and say, "Okay, we're willing to come in and purchase the property and offer you this." It kind of took them back at first, they were like, "Wait a minute, everyone else is telling us that we need to short sale, that we're not gonna make anything, or it's gonna go to foreclosure. But you're telling that you can actually put money in our pockets as part of this process?" And yeah, without going into a whole lot of detail with them we explained this is what our intention is. So, we got them moved. We actually helped them. We said, "Look either we can come in and help you move your things, or if you're willing we'll pay for a professional mover to come in and pack your stuff. You don't have to worry about any of it." And they much would have rather went that route.

So, we arranged for her to move in with her husband, vacate the property. We had a professional moving team come in, pack up everything, box it up, take it over there. And we went to work bringing value to the home. We put in new tile, new flooring, new carpet, new doors, new fixtures, originally, we tried to see what the market would look like with the kitchen, kind of leaving it a little bit. But we realized, you know what, if we're gonna do this we need to do it all out, because not only are we watching a rising market, but we have home owners that we have to fulfill our obligation to.

So, we came in and put granite counter tops. We finished all the counters. Re-did all of the cabinets. Finished and painted the garage, like literally made this house brand new in a sense.

Dave: Right. Do you remember what the numbers looked like? Like how much money did you have to go invest to bring this place up to par?

Peter: Our repairs were right out around $30,000 we brought into the deal.

Dave: Okay. So, $30,000 and that $30,000 made it a lot more desirable to the end buyer obviously.

Peter: Absolutely yeah.

Dave: What kind of difference did that make, like price-wise when you were going from short sale to actually being able to bring it to market? You are laughing already.

Peter: Well, part of the value that we brought as well as the appreciation that was happening in the market, there was about $100 to $150,000 difference from it being a short sale, to it actually being a standard sale at the top of the market.

Dave: Okay. You just lost me. So, you went from a short sale to $150,000? Help me out there. We're not sitting here with a white board so help me out.

Peter: Well, part of the process was coming in and making the repairs. So, part of that money was that we had a $30,000 investment that had to come in and happen. And the market, like we were right at the peak of the market back in 2013. So, we earned almost $50,000 in equity over the four or five months that we were working on the project.

Dave: Got you. So, homes around you were going up which is where Melina's experience came in saying, "Hey in this area where it's at as soon as the property goes on market it is sold. And people are paying more and more for them." As opposed to a short sale, we can actually come in invest this money and watch the market grow over the next couple of months while we're doing the work.

Peter: Right.

Dave: Okay, great. So, what did that look like for them? Like what did you guys end up? What was profit like for you guys, and how did you partner with them? What was that like?

Peter: Originally, we came in and said, "Okay, we'll offer you 50% of the proceeds," and we started to realize that was going to be a little less on their end. So, we actually came in and gave them a number. We said, "Hey we're gonna do everything we can to help you walk away with about $15,000.

Dave: Wow.

Peter: To them, that's a whole new world. They went from lost job, behind on bills, behind on payments, to, "Hey you mean like we have an opportunity to have a fresh start?"

Dave: Wow. So, what did you do with the mortgage? It was a mortgage like and I notice a default. So, how did that play out? What did you do?

Peter: It was in a notice of default Melina automatically got in contact with the bank. Let them know what our intentions were via the home owner's permission and everything contacting them on their behalf. So, the bank became very cooperative as well as the HOA that was involved. Because they realized that they had a plan, and that just a little bit of time would allow everyone to be settled and paid off in full.

So, the bank was actually really cooperative with us. The HOA was very cooperative with us. And we came in, made the repairs, brought it to the top of the market, marketed it. It sold pretty quick, got a really strong offer. People came in with quite a bit down because they really loved the home. And then we were able to sell the property and then divvy up all the responsibilities and profits from there.

Dave: Awesome. So, they end up with a $15,000 hard check from a short sale? Losing everything.

Melina: Well yeah. What they started out to believe was a short sale did not end up being a short sale.

Dave: Right.

Melina: Which if it was a short sale they would have not been able to profit in any way.

Dave: Yeah right. Very, very in kit.

Melina: So, this is really.

Dave: Yeah. So, those who are listening a short sale the mortgage company you don't have to sign an affidavit saying that you're not profiting in any way from the bank getting shorted which for obvious reasons right? The bank doesn't want to shortage and then see you walking away with money. So, this guaranteed that they were going to walk away with something, and even bigger. I mean I just heard you say you got a moving company. It had to be huge for them.

Melina: It was. It was a big deal for them not only financially but bigger was the emotional part of moving. She...in fact, Kelly couldn't even be there the day that we moved. That the movers came, she just emotionally just couldn't be there. It was very difficult for her. You know that first meeting like Peter said, he said it was a marriage counseling session, and there were many to follow.

Peter: At least three separate times we met as a group and just kind of helped them walk through things. And even I was assisted in walking through some things learning being a husband myself.

Melina: All those years of marriage counseling paid off babe.

Dave: Yeah, I was just gonna say. So here we are 20 years later and...

Melina: In our marriage you mean?

Dave: Yeah, in our marriage. We talk about it all the time like tell people utilize our experience because when...

Melina: Yeah, leverage all of the counseling and coaching and the stuff we paid for thousands of dollars.

Dave: Thousands? It is worth tens of thousands we are way past thousands. I can remember those days driving to the counselor, "What are we gonna talk about? We don't have anything to talk about today." And get there in two hours later go.

Melina: I didn't know we had all that.

Dave: I didn't know that was an issue, jeez.

Melina: We were proactive in our marriage.

Dave: Yeah, that has definitely come into practice in our lives just because clearly all things happen for a reason. So, Kelly and Robert knew me then. You being able to minister to them and how cool is that that she moves into a house he inherits now and she's kind of able to let go of some of that baggage and the need for independence. And really grow in her dependence on her husband and ultimately her father and so, that's a really big key. And at the same time, you got paid for this.

Peter: Yeah. This was actually the first deal where I actually was able to walk away with a pay check.

Dave: That was your first pay check?

Peter: Yeah.

Dave: Well congratulations then.

Dave: So $15,000 they made, if you don't mind sharing, what did you make?

Peter: We made right around $14,500, so it almost ended up being right around the 50% we had promised. But we wanted to give them a more standard number. And that was actually split 50-50 with my mentor and coach at the time, and so I walked away with about $7,500 from the deal.

Dave: Nice, and when you say standard you mean a nice round number?

Peter: Yeah.

Melina: Nice round it's a standard 7,500 bucks. And think about this, that the investment, I love this part, because the investment I'm surprised you didn't or maybe you were just gonna say and I cut you off. Were you gonna? The return on investment

Dave: You would never cut me off. Ever, we don't do that. We let each other speak and we listen intensely, because that is what we're supposed to do. No, go ahead.

Melina: What do you think about that return on investment?

Dave: I was just going to ask you. So, what was that return on investment? I mean you put out 30 grand, and you got back 30 grand. I don't know about you but can I got an extra 30 grand right here can I make an extra 30 on it right now?

Melina: Awesome.

Dave: That's really great.

Melina: Huge in terms of big giant pay days, not. But that wasn't the point at all. The point of this was the idea that, they told us that we saved their marriage.

Peter: Absolutely, that was probably one of the biggest things that I will walk away from is that probably one of the last times that we were meeting and we were cutting them a check and everything and it's like, "You know we're so thankful for meeting you guys, we're so thankful for getting involved because this scenario, this situation which seemed so dire when we got into it. Actually, the process that you have helped us walk through has literally saved our marriage."

Dave: Wow.

Melina: Yeah. It was pretty, it was really humbling for sure. It was pretty amazing and then you know put a little bit of green bucks in the bank always helps for everybody.

Dave: Chi chink. I mean Flippin Off a purpose driven podcast about flipping houses, but making a difference. And I think that those who are listening that's got to be the key to every single deal that you get into. You have to be looking to make a difference. We say it all the time, "We're gonna leave the home owner in a better spot than we found them." And like this is a better spot with whipped cream, sprinkles, and cherries on top. Because I mean it's such a dramatic impact in their lives, and I'm certain that if they were sitting here today, they would look altogether different than the first time you met them. And you got paid for it at the same time this just doesn't get any better.

Melina: I was thinking about that. We were talking about like when we first met them, they were thinking that they were either going to be having a foreclosure or a short sale, which for most home owners is the same thing. When they have to short sale a property many home owners believe that they are losing their house not selling it, even though technically they are selling it. They really feel like they're losing it. So, the idea that they went from a short sale and losing their home, and/or a foreclosure, to having a standard sale, and selling a property that they could be very proud of, you know the end product was really beautiful and nobody would have ever known the difference in that it was their property, it was her property that she was able to sell and sell it beautifully to a very, very happy family. And save their marriage and make money in the process is really an incredible win.

Dave: It also sets up her future, right? I mean she's got now a standard sale as opposed to a short sale. As they are getting back on their feet, as they're getting back to work, whether that house that they inherited or whether it's time to buy a second house or move into a house that they purchase together, who knows? But just it creates an opportunity for them, so really remarkable. So, great job Peter, and you got paid for it.

Melina: Nicely done.

Peter: And we got paid yeah.

Melina: I like that.

Dave: Fantastic, and honey thanks for making all those counseling sessions pay off.

Melina: How was your return on investment anyway? Speaking on return on investment.

Dave: I got an amazing return on investment. Are you kidding, you're the best wife on the planet.